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Transferring ownership of your home to your children. What are your options?
1. Value the property
An independent expert should be instructed to estimate the property’s market value. This is important when it to comes to tax and dividing the estate up fairly, especially when multiple heirs are involved.
Advance on inheritance
An advance on inheritance is a free gift between testators and heirs during the former’s lifetime. So, if parents hand over their home to their children before they die, this is classed as an advance on inheritance.
Important: For property, the advance on inheritance must be certified by a notary.
Duty to compensate for advances on inheritance.
Heirs must compensate for any advances on inheritance when dividing up the estate. If a child inherits the family home, its market value at the time of the division of the estate is credited to them. This can put heirs in a difficult situation: if there aren’t sufficient funds to pay out to the other heirs, in the worst case scenario the house will need to be sold.
Exemption from the duty to compensate.
Parents may exempt their heirs from the duty to compensate in a will. However, the statutory entitlements must be maintained. A contract of inheritance is also possible: this will enable all parties to agree on a solution together, for example with regard to how much the compensation payment should be or when it should be paid.
Gift
With a gift, ownership of the property is transferred to a party without payment. If this party is the owner’s children, this is usually understood to be an advance on their inheritance. With mixed gifts, the property is transferred at a price below the market value – the difference is classed as a gift. With both options, certification by a notary and entry in the land register are required.
Compensation obligation for gifts.
If a property is transferred to children without payment during the parents’ lifetime, this is classed as a gift under law. However, if the gift is given in the context of a future division of the estate, it can be classed as an advance on inheritance. In principle, if no reference is made to an advance on inheritance, there is no statutory compensation obligation with respect to the other heirs in the case of a gift. This means the beneficiaries are not automatically obligated to pay compensation when the estate is divided later on. However, if equal treatment of all heirs is to be ensured, the testator can give an explicit instruction that the gift must be compensated for. Conversely, they can also state that the gift need not be subject to a compensation obligation. Such an instruction must be given in writing, for example in a will or a contract of inheritance. This process may not breach the statutory entitlements of the other heirs.
Sale
With a sale to the children, ownership of the property is transferred in return for payment. The property can be sold for the full market value or deliberately below this. If the property is sold below market value, this is deemed to be a mixed gift. A notarial contract of sale and entry in the land register are required. The sale must be documented correctly in order to establish clarity under tax provisions and inheritance law.
4. Appointment with the notary and entry in the land register
As soon as the type of transfer has been determined, a notary must draw up a publicly certified contract. This contract governs all details such as whether the transfer represents an advance on inheritance or a gift, the purchase price and any rights of residence or usufructs. Following this, the transfer of ownership is made legally valid through the entry in the land register. Only once the transaction has been entered in the land register is the child the official owner of the property.
What others wanted to know.
Our property experts give an insight into a selection of the most frequently asked questions. You can submit your own question too. We will be happy to help you.
Lara L. (36), Riehen
What costs are associated with property transfers?
When you transfer a property, you’ll incur notary and land register costs. In many cantons, you won’t need to pay a property transfer tax if the property is being handed over to your children. Property gains tax may also be deferred in certain cases. Gift tax differs from canton to canton, and where direct descendants are concerned there is often no tax to pay. A professional property valuation can lead to further costs, but is absolutely recommended as part of the transfer process.
Dominic C. (38), Kreuzlingen
Is there a ten-year limit in Switzerland?
There is no regulation in Switzerland prohibiting the state from returning to the matter of a gift or an advance on inheritance once ten years have elapsed. If the parents’ assets or retirement income are not sufficient in old age, the state can also refer to gifted assets or excessive purchase expenses from over ten years ago. This can lead to supplementary benefits being reduced or cancelled, which demonstrates the importance of carefully considering all options when transferring a property and seeking expert advice.
Lara L. (36), Riehen
What costs are associated with property transfers?
When you transfer a property, you’ll incur notary and land register costs. In many cantons, you won’t need to pay a property transfer tax if the property is being handed over to your children. Property gains tax may also be deferred in certain cases. Gift tax differs from canton to canton, and where direct descendants are concerned there is often no tax to pay. A professional property valuation can lead to further costs, but is absolutely recommended as part of the transfer process.
Dominic C. (38), Kreuzlingen
Is there a ten-year limit in Switzerland?
There is no regulation in Switzerland prohibiting the state from returning to the matter of a gift or an advance on inheritance once ten years have elapsed. If the parents’ assets or retirement income are not sufficient in old age, the state can also refer to gifted assets or excessive purchase expenses from over ten years ago. This can lead to supplementary benefits being reduced or cancelled, which demonstrates the importance of carefully considering all options when transferring a property and seeking expert advice.
